Gold cracked below $1,100 today, making a new low in its now
4-year-old bear market. Despite all that central bank money printing!
The impetus behind today’s decline: Friday’s news that
China’s government accumulated far less gold than most had expected.
The People’s Bank of China on Friday published figures on
its gold reserves for the first time since April 2009. Its official gold
reserves stood at 53.3 million ounces, or 1,658 metric tons, in June.
China’s government accumulated far less gold than most had
expected. That’s an increase of 604 metric tons since its last report in 2009,
up from 1,054 metric tons or 33.88 million ounces. But it’s less than half what
the market was expecting, which was a total of well over 3,000 metric tons.
That’s no surprise to me. I’ve repeatedly stated that China
is not looking to corner the gold market. For two chief reasons:
A. Authorities in Beijing are acutely aware that a gold
standard is historically deflationary. So why would they want to implode the
Chinese economy?
B. China has never had a gold standard and gave birth to
paper money way back in the Tang Dynasty (618-907). In other words, its
tradition has always been largely paper money.
Yes, it is true that China wants a strong Yuan. But it does
not want the restraints of a gold standard. Period. In fact, there isn’t a
government on the planet today that wants a gold standard. “China does not want
the restraints of a gold standard.”
Quite to the contrary — and led by Europe and the United
States — most western governments are now gearing up for a cashless, electronic
currency.
Why? Three simple reasons …
A. They can track and tax you more.
B. They intend to eliminate the underground economy. And
C. They want the ability, in crisis times, to prevent bank
runs, by simply throwing the kill switch on financial transactions over the
internet.
Of course, it’s all being “sold” to you in the guise of
monitoring and catching drug dealers and terrorists. And that may well be part
of their motivation to an electronic currency.
But let’s never forget: Politicians always have ulterior
motives. So make no mistake about it. They despise gold and are moving towards
eliminating gold from the monetary system, once and for all.
Of course, it will backfire on them in the end. For once
gold bottoms and investors worldwide realize that it’s governments that are the
problem today … and not the private sector …Gold will once again soar.
Other Developments of the Day
One of the last vestiges of the Cold War has passed into
history. The Cuban interests section in Washington officially became an
embassy, with the U.S. and Cuba restoring full diplomatic relations. The change
occurred shortly after midnight without ceremony. Meanwhile, the same will be
happening in Havana, with the U.S. interests section officially becoming an
embassy there. The U.S. flag won’t, however, fly over the building until
Secretary of State John Kerry visits in August for an official ceremony.
Staying overseas, banks in Greece reopened today after being
closed for three weeks because of the lack of funds ahead of a bailout
agreement with international creditors. Until now, Greeks were limited to
withdrawals of 60 euros a day (about $65), but now the limit will be based on a
weekly amount of 420 euros, meaning they won’t have to line up on a daily basis
to get their money. Other aspects of the bailout agreement will go into effect
today, such as a rise in the Value-Added Tax (VAT) to 23% from 13%.
The first government-approved drone delivery took place in
the U.S., with an Australian-made craft transporting medical supplies to a
rural health clinic. The drone made three three-minute flights carrying 24
medical packages. The test was hailed as proof that drones can make deliveries
to remote areas that are hard to reach by other means.
U.S. businesses are less optimistic about sales for the
upcoming months, according to a new survey. More companies plan to cut back on
investment in equipment and buildings in the third quarter. Nevertheless,
hiring and wage and salary increases are likely to continue at about the same
pace in the quarter as they did in the second, the survey showed.
Market Roundup Dow+13.96
to 18,100.41 S&P+1.64 to 2,128.28 NASDAQ+8.72 to 5,218.86 10-YR Yield+0.023 to 2.372% Gold-$29.10 to $1,103.40 Oil-$0.91 to $50.32
"Source: http://www.moneyandmarkets.com"
Money and Markets, A Division of Weiss Research, Inc.
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